Insights by sector

TRANSPORT

The transport sector is a stronghold for oil consumption, accounting for >50% of total liquids demand. With the electrification of road transport on the verge of taking off, the sector will face strong disruption. Marine and aviation are expected to remain dominated by fossil fuels, therefore this section focuses on road transport.

The road transport energy demand trend will reverse in the next decade

Impact of road transport drivers on liquids demand

(MMb/d)

The growth in the number of vehicles slows down

In non-OECD regions, growing populations and GDP will continue to drive an increase in the number of vehicles and fuel consumption until 2050

In OECD regions, however, demand for cars will have peaked in the next decade caused by increased urbanization, shared mobility, and improved public transport

Fuel efficiency increases

The increase in fuel efficiency will be driven by strict government targets for new vehicles requiring a 1-2.5% annual improvement in fuel consumption

More efficient new vehicles will cause liquids demand growth to slow down, resulting in a demand reduction of ~5.5 MMb/d in 2030

More users move to electric vehicles

Declining battery prices and supporting regulations will drive battery electric vehicles to account for 35% of sales of new cars and 25% of sales of certain trucks by 2030 in the EU and China

The electrification of cars, buses, and trucks in leading regions will cause demand for oil to peak and displace ~20 MMb/d of oil demand in 2050

Implications for the sector

The transition to electric vehicles will cause global oil demand to stop growing and disrupt the automotive market.

Oil & gas sector

After oil demand for road transport peaks in 2025, supply could exceed global diesel and gasoline demand, which could potentially disrupt current pricing dynamics. In addition, electric vehicles, autonomous driving, and shared mobility will require retailers to re-invent the fuel station business model

Power sector

Electricity demand from cars is expected to have a limited additional impact on generation capacity, given existing demand in other sectors today. It will require local grid upgrades in order to cope with new demand locations and peak loads from superchargers

Automotive sector

Emission targets will lead to a short-term increase in R&D spend on cleaner engines on top of the development of EVs, while at the same time dual manufacturing lines will increase production costs. New players will challenge market share from traditional car manufacturers

To watch in the next 5 years

New regulations, the production of electric vehicles, and early adopter behavior will indicate how fast EV adoption will take place.

Regulations

Before electric cars and eTrucks reach cost parity for the majority of users, local and national regulators might enforce EV adoption. The first cities around the world have already announced diesel bans

Availability of electric models

For significant uptake, electric vehicles need to be readily available. Model launches, introduction prices, and the production ramp-up of manufacturers will be an important factor determining if supply can keep up with the expected demand across vehicle segments. It will also rreveal more about the strategies of traditional OEMs, which may face cannibalization of the ICE vehicles in their portfolio

Customer switching behavior

As total cost of ownership of EVs starts to outcompete ICE powertrains, customers will start switching. The rate of adoption will be influenced by the perceived attractiveness, the acceptance of new technology, and the business case of individual use cases (especially in the commercial vehicles segments)

We expect an 1-2.5% annual improvement in fuel consumption for cars and trucks until 2030

Global penetration of battery electric cars will reach 47% in 2050

Tipping points

Reinforcing disruptors like shared mobility and autonomous vehicles can accelerate electrification and further disrupt road transport

Autonomous vehicles

Driverless cars could enable very low cost taxi services, which would strongly reduce personal car ownership. As robo-taxis are expected to be electric, this would strongly disrupt oil consumption

Electrification

The speed of electrification increases if technological breakthroughs further reduce battery cost or if regulations become stricter, especially in the case of a mandatory sales quota or full (city) bans

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McKinsey Energy Insights

We are the analytical and business intelligence arm of McKinsey & Company’s energy practices. We serve leading international and national energy companies, oilfield services and equipment providers, utility companies, and private equity investors across the entire energy value chain.

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